At one point during the VCJ roundtable there is some spot-on musing about the effect of the absent IPO market for venture-backed companies. As a panelist pointed out, the last five years have shown why the venture market is not scalable: The amount of money being put into venture-backed companies has soared, while the IPO market remains flat (or down, depending on where you put your start point). At double the current IPO rate it will take 50 years to get the exits LPs are implicitly expecting. Ouch.
All of this, of course, has turned the venture business into a search for M&A exits. And that might work, were it not for the amount of money being managed by most funds. Because struggling for singles and doubles in a $270m fund that exists solely for the odd home run — a high-value IPO — is a triumph of self-delusion. A big bucks venture business built around M&A is, as one panelist put it, a mediocre asset class, at best.